What are the acceptable Accounting systems for maintaining the Books of Accounts?
The Business Income or Profits and Gains of Profession shall be computed in accordance with, either • Cash System or • Mercantile System of accounting regularly employed by the assessee. An assessee is prohibited from following hybrid system of accounting with effect from assessment year 1997-1998. Accounting Standards for Mercantile System: – The Central Government would notify from time to time the accounting standards to be followed by any class of assessees or in respect of any class of income. The following two accounting standards have been notified by the Central Government so far in respect of any assessee following Mercantile system of accounting: – • Accounting Standard I relating to disclosure of accounting policies • Accounting Standard II relating to disclosure of Prior Period and Extraordinary Items and Changes in Accounting Policies How to value the Inventories? • Inventories are to be valued at Lower of Cost or Net Realisable Value. • Both the opening and closing stocks
